Cromwell aims to double first-half funds profit

Cromwell Property Group
expects to more than double profits from funds management in the second half of this financial year as it rapidly approaches $1 billion in direct and listed property funds under management.

Revenue from Cromwell’s funds management business jumped 59 per cent in the first half, up $1.4 million on the previous corresponding period. The business recorded a net profit of $800,000.

Cromwell director of finance and funds management
Daryl Wilson
said the group was certain it could grow the business at a much higher rate than ever before.

“We will have a bigger second half than the first and we expect to more than double the first-half profit," he said.

“A lot of people like Cromwell because of the potential for the funds management business, which we are confident we can grow."

Mr Wilson said Cromwell would look more towards a core plus fund rather than core funds, where there was already some saturation.

Core plus usually incorporates “going up the risk curve a little bit" in terms of lease, development or repositioning risk, but with a higher internal rate of return than core funds at up to 15 per cent.

“We have been toying around on the wholesale direct property area for about six months but we are waiting to do something in the core plus area," he said.

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Pension funds such as Canada’s PSP Investments are backing locals such as Charter Hall for core investment product.

However, Mr Wilson said there were early indications that similar institutional investors would soon be seeking core plus.

Cromwell has spent the past few years establishing relationships with major Asian-based institutional investors for such joint ventures and its major security holder, South Africa’s Redefine, has indicated it is open to co-investment.

“Given what is happening in property at the moment with cap rate compression, we see the appetite for higher risk will come soon," Mr Wilson said.

Cromwell has also been building strong support in its listed funds management business, which controls the Phoenix Property Securities Fund.